China: Tasked with putting its house in order

Central government also faces a dilemma in deciding on its interest rate policies.

As inflation rises - it was 1.9 percent in December and 1.5 percent in January - the market has expected an interest rate hike to come sooner or later.

While the real interest rate risks falling into negative territory due to rising inflation, any hasty adjustment of it could hurt enterprises, especially job-creating private companies, and could even shake the newly recovered economy. It could also stoke inflows of speculative capital from overseas.